Small Business Credit Survey: COVID-19 and Disparate Firm Conditions in New Jersey

Small businesses in New Jersey endured unprecedented challenges throughout 2020 as a result of the COVID-19 pandemic and the recession that followed. Academic research and data from the Small Business Credit Survey (SBCS) confirm that the effects of the pandemic were negative and extensive, encompassing decreases in firm activity,¹ revenue, employment, and financing opportunities across the United States.² This was true for New Jersey businesses as well, although additional analysis is necessary to understand how these trends played out at the state level.

Some of the report's key findings for New Jersey are summarized here.

Quantitative Findings

• Between 2019 and 2020, reported decreases in revenue and employment were more prevalent for firms owned by people color. In particular, 96 percent of Asian-owned firms, 95 percent of Hispanic-owned firms, and 93 percent of Black-owned firms reported that they experienced a decrease in revenue.
• Just 42 percent of Black-owned firms reported receiving all the Paycheck Protection Program (PPP) funding they sought.
• More than one in five Latino-owned firms said that they received no PPP funding, about seven times the rate of White-owned firms.

Qualitative Findings

• Credit access disparities are about more than being banked or unbanked. These disparities are highly impacted by relationships, trust, and the lending institutions minority-owned small businesses felt would better meet their needs.
• When it came to decisions on whether to access public programs such as the PPP, perceptions of risk mattered. The PPP was understood by many to be a loan, and the risk of that loan was something many very small, home-based, or minority-owned businesses felt was too great.
• The pandemic exposed how structural barriers, such as a lack of collateral and a lack of documentation for immigrant-owned businesses, hampered access to capital and financing for many small businesses. Many of these reflect systemic issues that existed before the pandemic and have been exacerbated by the crisis.

Download the report appendix.

This report is part of a Research in Action Lab. Conducted in partnership with New Jersey Economic Development Authority (NJEDA), the lab focuses on access to credit and capital for small businesses hit hardest by the COVID-19 pandemic.

Join the Philadelphia Fed and NJEDA for a virtual event, Main Street in the Garden State: Ensuring an Equitable Small Business Recovery, on November 15 from 10:00 a.m. to 12:00 noon to discuss the findings from this report along with opportunities for developing an inclusive recovery.